Saturday, April 18, 2009

Not so Rosey

The Houston office market experienced the highest quarterly negative net absorption rate in the last five years in the first quarter of 2009, according to the Office Market Trends Houston report by Grubb & Ellis Co.
Houston had nearly 919,000 square feet of negative net absorption for the quarter. Of the total, about 6,600 square feet was Class A space, 768,000 square feet was Class B space and 143,500 square feet was Class C space.
The Grubb & Ellis report shows the Houston office market reached a 14.7 percent vacancy level during the first quarter, the highest level since the end of 2006. Vacancy rates are expected to continue rising since 5.3 million square feet of office space is under construction in the Houston area.
The sublease space, or space put back onto the market by companies that no longer need it, rose by about 845,300 square feet to nearly 3.5 million square feet during the first quarter. The amount is still significantly lower than the 5.5 million square feet of sublease space that hit the market during the last economic downturn that began in 2001, according to Grubb & Ellis.
Asking rents for Class A space, or the nicest, newest office space, declined by 7 cents to $30 per square foot for the quarter. But asking rents in downtown Houston actually rose by 5 cents during the quarter to $38.43 per square foot.
Asking rents for Class B space decreased the most during the quarter, dropping by 36 cents to $20.68 per square foot. Asking rents for Class C space also fell — by 23 cents to $15.65 per square foot. For more information see www.houstonrealtyadvisors.com